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Judge: Nothing wrong with state laws that allow Uber and Lyft to operate

A federal judge today dismissed a lawsuit by Boston cab owners against state rules that let "transportation network companies" such as Lyft and Uber carry passengers to and from Boston destinations.

The Boston Taxi Owners Association had argued, in a suit filed in US District Court in Boston, that the state was unconstitutionally depriving them of their property, because the increased competition has chopped the value of their city-issued medallions.

But But in his ruling today, US District Court Judge Nathaniel Gorton said the medallions are the product of local regulations, not inalienable property rights protected by the Constitution.

[T]he owner of a medallion does not possess a property interest in the transportation-for-hire market itself. Thus, a medallion owner has no right to exclude others from the market. This is manifest from the fact that taxi medallion owners may not exclude other taxi medallion owners from participating in the market. Nor can they exclude new medallion purchasers when cities summarily increase the number of available medallions. ...

The exclusivity of medallion owners' access to the market prior to the arrival of TNCs existed by virtue of local regulatory structures, not as a result of the medallion owners' property rights. Medallion owners have no property interest in the enforcement of local taxi regulations against others.

Gorton also pointed to a new state law that removes all regulation of the companies from local control. Anticipating that, the cab owners said it is unfair for the online-based companies to be treated differently from them.

Gorton ruled, however, that he agrees with state officials that the new companies represent a new way to deliver transportation services and that they were within their rights to codify that in the new state law. As one example, he pointed to the way the companies use "surge pricing" at peak times, something the medallion cabs do not (he did not mention that they are legally barred from doing that).

Furthermore, it is conceivable that the state legislature concluded that taxis should be subject to tighter regulation of rates to protect passengers. Unlike TNCs, which can only pickup passengers through pre-arrangement, taxis can accept street hails. As the Commonwealth defendants argued in their memorandum in support of the motion to dismiss, the consumer knows what to expect when arranging for a TNC and even has the opportunity to shop for better fares but in the case of a street hail the passenger has no information about the taxi driver and has no opportunity to negotiate the fare.